NEW YORK — Viacom senior execs were crowing Thursday as the company posted record revenues, a quarterly profit up 21% and announced its first dividend since Ronald Reagan was president.
Weak performance from its film studio and radio division were the only negatives in the company’s otherwise sterling financial report.
Viacom overall profits were $660 million, with double-digit gains in cable networks, TV, homevideo and outdoor businesses. Total revenues rose 10% for the quarter to a record $6.42 billion on the back of huge advertising increases at its cable networks.
Speaking to analysts on a conference call, chairman-CEO Sumner Redstone applauded the past three months as “the best quarter in Viacom history,” with performances, he said, that highlight Viacom’s resilient mix of businesses and shrewd managerial execution that produce consistent results regardless of the economic environment.
In a move that few other media congloms are in a position to entertain, Viacom’s board approved a 6¢ per share quarterly dividend payable in October. Viacom last issued a dividend in 1986.
“The recent change in tax laws prompted us to take a long, hard look at dividends. … We took full advantage of our ability to generate free cash and to share success with shareholders,” said Redstone. He emphasized the dividend wouldn’t affect the company’s ability to simultaneously pursue acquisitions, internal investment and share buybacks.
“More than ever, Viacom is in a class by itself,” trumpeted Redstone in a characteristicallycelebratory tone.
Growth was clearly driven by national advertising and homevideo revenues from Blockbuster. Overall ad sales were up 11%, and the company indicated strong scatter pricing for the latter half of the year. Viacom said it is on track to deliver on its promise of high-single-digit revenue and earnings growth for full year 2003 as it benefits from the robust upfront ad market and an expected windfall from its upcoming Super Bowl broadcast on CBS.
At the cable network division, which includes MTV Networks and Showtime, sales jumped 22% in the quarter to $1.35 billion, with operating income of $492.8 million. Ad revenues at the cable nets grew a hefty 31% while affiliate fees saw a 10% gain.
Over at CBS and the TV stations, revenues grew 10% to $1.9 billion with operating margins up slightly over last year to 20%. Syndication had a strong run thanks to sales of “Dr. Phil.”
Chief operating officer Mel Karmazin pointed to Viacom’s strength relative to its rivals, noting the company’s aggregate (broadcast and cable) prime audience share is 26, giving it a 63% advantage over conglom rivals like Disney. Karmazin expects third quarter scatter pricing up 30%-40% from the upfront across all dayparts, and low cancellation rates. Early morning and news slots, he said, are virtually sold out. Furthermore, he stressed CBS was maintaining strong viewing momentum this summer.
He also expects to have sold at least 50% of CBS’ 60 Super Bowl ad spots by the end of July.
Karmazin noted that even while the U.S. economy grew barely 3% so far this year, Viacom’s revenues were up 8%, with operating income up 11%.
It was a slow season at filmed entertainment, where operating income dropped some 36% to $72 million on revenues of $920 million, down slightly from $925 million in the same quarter last year. Company attributed the shortfall to having had only two theatrical releases in the quarter (“The Italian Job,” “Rugrats Go Wild”) compared with four releases a year ago.
Karmazin, who last quarter reprimanded the sluggish radio group, said major improvements were already visible in June. Still, for the quarter, revenues fell 3% to $551 million. Infinity is now the No. 1 radio group in seven of the top 10 U.S. markets (including New York, Los Angeles and Chicago), Karmazin noted. “We’re guardedly optimistic that radio is heading back,” he said.